I originally put this on the economics forum, but I want to put it here too.

This is a message to Charleslb. Although, I think it will be interesting for others to read.

Whenever there is a fluctuation in the market economy. If output declines, inflation spikes, or unemployment increases, those on the left immediatley blame the market economy.

Some simply blame "greed" on the part of some of the wealthy class. This allows them to advocate policies that increase regulation and state control of the market economy but ultimatley preserve the private core. Others, such as you, see these fluctuations as representing the fundamental failure of the market economy.

Of course, the idea that unregulated markets are at the core of every crisis seems to be largely assumed. The libertarian and conservatives who point out that there are very serious, logical, and well researched explanations for these fluctuations that either pin the blame on real, exogeneous shocks (like technology or natural disasters) or on failed government policies themselves (like misplaced regulations or bad fed policies) are mocked as "market fundamentalists".

But who are the real fundamentalists?

Take, for instance, the housing based 2008 financial crisis. As many of us know, the federal reserve kept interest rates too low for too long in the mid 2000s, government regulations encouraged high risk loans to poorer borrowers, and government sponsered enterprises like Fannie Mae and Freddie Mac were at the core of the crisis. Of course, to make matters even worse, the regulations that did exist were very poorly enforced and ended up distorting markets because some players ended up getting in bed with the regulators themselves.

It is at least debatable that bad government policies played a major role in the 2008 crisis. However, folks like you and others on the left call anyone who call into question the prevailing narrative that the "free market failed" fundamentalists.

The irony here is that the anti market folks, such as yourself, do not have any coherent explanation for the crisis. Just repeating that the "rich got richer and the free market failed" is not an explanation. The far more coherent explanation involves complex interaction between bad government policies as well as some market players gone awry. However, you simply mock this explanation without ever adressing it.

The deeper problem here is that you constantly speak of some fundamental problem in the market economy. However, you have yet to prove that this even exists. Yes, the market economy is subject to fluctuations. By the way, so is nature. And, of course, state run economies have never exactly been the epitome of "stability". Although, they have been stable in their consistent ability to spread economic misery to all but the politically well connected citizens.

However, in the market economy, living standards rise in the long run. Technology is born, incomes rise, things become less expensive. A state run economy would never have seen the widespread commercial usage of something like the computer.

Instead, state run economies are plagued by shortages and lacking in up to date technologies. This is inherent to state run economies.

The reasons market economies do see fluctuations actually is quite complex. For one, exogeneous shocks like technology and natural disasters do lead to changes in the market economy. Also, creative destruction, which is absolutely essential to prosperity, may lead to some short run fluctuations. Finally, state distortions also contribute mightily to many of the "crashes" or supposed "failures" of the free market.

These are not inherent failures of the market economy, but, in many ways, part of the beauty of the market economy (outside of the state distortions of course). Changes due to natural disasters and technology as well as creative destruction is simply necessary.

Of course, I am not what you would call a "libertarian utopian". A pure market economy has never existed, and I do not have much confidence that it ever will. However, in many countries, we have seen mostly unregulated markets at work. We see them at work in Hong Kong, Singapore, Chile, Switzerland, and even here at home in the USA.

Of course, none of these countries are "pure free markets". They are all far from it. However, they do have heavily market based economies that have proven that the free market doesn't have to be totally "free" to deliver prosperity.

In conclusion, I must tell you that you must realize the inherent flaws are not inherent to the market economy but to reality. Reality is not perfect. Blaming the shortcomings of reality on capitalism is simply silly. You must look at what works where and why it works. In this regard, market economies trump state run economies on all measures

Sincerely,Ameriman

We spend too much our time measuring compassion for those in needs by measuring inputs. How much money are we spending? How many programs are we creating? But we are not focusing on outcomes. Are these programs working? Are people getting out of poverty?
-Paul Ryan

At 5/16/2012 7:21:33 PM, Ameriman wrote:I originally put this on the economics forum, but I want to put it here too.

This is a message to Charleslb. Although, I think it will be interesting for others to read.

Whenever there is a fluctuation in the market economy. If output declines, inflation spikes, or unemployment increases, those on the left immediatley blame the market economy.

Some simply blame "greed" on the part of some of the wealthy class. This allows them to advocate policies that increase regulation and state control of the market economy but ultimatley preserve the private core. Others, such as you, see these fluctuations as representing the fundamental failure of the market economy.

Of course, the idea that unregulated markets are at the core of every crisis seems to be largely assumed. The libertarian and conservatives who point out that there are very serious, logical, and well researched explanations for these fluctuations that either pin the blame on real, exogeneous shocks (like technology or natural disasters) or on failed government policies themselves (like misplaced regulations or bad fed policies) are mocked as "market fundamentalists".

But who are the real fundamentalists?

Take, for instance, the housing based 2008 financial crisis. As many of us know, the federal reserve kept interest rates too low for too long in the mid 2000s, government regulations encouraged high risk loans to poorer borrowers, and government sponsered enterprises like Fannie Mae and Freddie Mac were at the core of the crisis. Of course, to make matters even worse, the regulations that did exist were very poorly enforced and ended up distorting markets because some players ended up getting in bed with the regulators themselves.

It is at least debatable that bad government policies played a major role in the 2008 crisis. However, folks like you and others on the left call anyone who call into question the prevailing narrative that the "free market failed" fundamentalists.

The irony here is that the anti market folks, such as yourself, do not have any coherent explanation for the crisis. Just repeating that the "rich got richer and the free market failed" is not an explanation. The far more coherent explanation involves complex interaction between bad government policies as well as some market players gone awry. However, you simply mock this explanation without ever adressing it.

The deeper problem here is that you constantly speak of some fundamental problem in the market economy. However, you have yet to prove that this even exists. Yes, the market economy is subject to fluctuations. By the way, so is nature. And, of course, state run economies have never exactly been the epitome of "stability". Although, they have been stable in their consistent ability to spread economic misery to all but the politically well connected citizens.

However, in the market economy, living standards rise in the long run. Technology is born, incomes rise, things become less expensive. A state run economy would never have seen the widespread commercial usage of something like the computer.

Instead, state run economies are plagued by shortages and lacking in up to date technologies. This is inherent to state run economies.

The reasons market economies do see fluctuations actually is quite complex. For one, exogeneous shocks like technology and natural disasters do lead to changes in the market economy. Also, creative destruction, which is absolutely essential to prosperity, may lead to some short run fluctuations. Finally, state distortions also contribute mightily to many of the "crashes" or supposed "failures" of the free market.

These are not inherent failures of the market economy, but, in many ways, part of the beauty of the market economy (outside of the state distortions of course). Changes due to natural disasters and technology as well as creative destruction is simply necessary.

Of course, I am not what you would call a "libertarian utopian". A pure market economy has never existed, and I do not have much confidence that it ever will. However, in many countries, we have seen mostly unregulated markets at work. We see them at work in Hong Kong, Singapore, Chile, Switzerland, and even here at home in the USA.

Of course, none of these countries are "pure free markets". They are all far from it. However, they do have heavily market based economies that have proven that the free market doesn't have to be totally "free" to deliver prosperity.

In conclusion, I must tell you that you must realize the inherent flaws are not inherent to the market economy but to reality. Reality is not perfect. Blaming the shortcomings of reality on capitalism is simply silly. You must look at what works where and why it works. In this regard, market economies trump state run economies on all measures

Sincerely,Ameriman

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